Legal challenges and opportunities in Canada’s health technology sector

AI is transforming medical innovation amid a surge in mergers and acquisitions
Legal challenges and opportunities in Canada’s health technology sector

The intersection of technology and health sciences is transforming rapidly, with artificial intelligence playing a pivotal role in this evolution. This Lexpert Special Edition: Technology and Health Sciences delves into the current trends, challenges, and opportunities within the healthtech sector, spotlighting top-ranked lawyers serving the industry. These legal experts offer their insights on the resurgence of mergers and acquisitions (M&A) and the profound impact of AI on healthcare and drug development. 

Deal-making resurgence in healthtech 

Deal-making in the technology and healthcare sectors is experiencing a revival after a post-COVID slump. M&A lawyers highlight a promising landscape driven by improving stock market indices and increased valuations of healthcare and tech companies. “I’d say, overall, the situation is improving,” says Aaron Sonshine at Bennett Jones LLP. “Look no further than the US and Canadian stock market indices – you see the NASDAQ, Dow, and even the TSX hovering around historic highs. That’s very helpful,” he says.  

A catalyst for growth: artificial intelligence 

Artificial intelligence is reshaping the healthtech landscape. Vancouver-based Bio Conscious, for instance, uses AI to develop predictive tools for diabetes management. On the drug development front, AstraZeneca’s acquisition of Fusion Pharmaceuticals for $2.4 billion underscores AI’s role in advancing next-generation therapies. 

“You’ve got large companies and private equity funds sitting on significant cash reserves, and while valuations have gone up from recent lows, they are still attractive to potential buyers,” Sonshine says. As patents expire on many Big Pharma drugs, companies are keen to refill their pipelines through strategic acquisitions of smaller firms with promising late-stage developments. 

Navigating the M&A landscape 

Alethea Au, a partner in the M&A group at Stikeman Elliott LLP, notes a significant uptick in deal-making activity since the start of the year. “There seems to be more interest, more exploration in deal-making,” she says, highlighting that interest rates and capital costs are influencing valuation considerations.  

Au also points out the increased due diligence now required in transactions, with buyers taking more time to assess potential issues before proceeding. “Buyers are a little more reluctant to just steamroll through any potential issue they see, so more due diligence is being done on the legal and financial side of things,” says Au. Creative solutions, such as earnouts and rollover equity, are often employed to bridge valuation gaps between buyers and sellers. 

AI’s impact on drug development 

AI’s potential to revolutionize drug development is significant, though still in its early stages. Cheryl Reicin, international life sciences chair with Mintz, Levin, Cohn, Ferris, Glovsky, and Popeo, emphasizes the need for innovation in addressing neurological diseases like Alzheimer’s. “Right now, there aren’t a lot of great drugs for these conditions. So, there is a huge need for innovation," says Reicin. 

AI promises to enhance precision and reduce errors in drug discovery, potentially accelerating the time it takes to bring new treatments to market. However, Reicin notes the life sciences sector’s cautious approach as it prepares for the AI revolution, balancing the hype with practical readiness. 

Privacy law and AI advancements 

As AI advances, the regulatory landscape is evolving to address privacy concerns and cybersecurity. Bill C-26 and Bill C-27 represent significant steps in updating Canada’s cybersecurity and privacy laws, focusing on AI and critical infrastructure. “We’re going to have a whole new privacy regime in this country,” says Brent Arnold, a partner at Gowling WLG

AI’s rapid development is also influencing the field of biometrics, with increased regulatory scrutiny. Kirsten Thompson, head of Dentons’ privacy and cybersecurity group, discusses the complexities of biometric data and the heightened requirements for its use under privacy laws. 

The future of healthcare delivery 

AI is not only transforming drug development but also healthcare delivery. Susan Newell, a corporate commercial lawyer and partner at Osler, Hoskin & Harcourt LLP, highlights the growing use of AI in healthcare technologies. “Now, more than ever, privacy and technology considerations are paramount to the delivery of healthcare services,” she says. 

The pandemic has accelerated the adoption of virtual care, raising new regulatory and legal challenges. Dr. Gary Srebrolow of Blaney McMurtry LLP advises healthcare professionals on maintaining standards of care in virtual appointments, emphasizing the importance of jurisdictional issues and insurance coverage. 

In this Special Edition, we explore these critical developments and provide insights from leading legal experts on navigating the complex, rapidly evolving landscape of technology and health sciences.